Can you allow your tenant to run a home business at your property?

January 2, 2019
Home Business

In the past, the standard advice given to Landlords whose tenants wanted to run a home business was ‘No, you should not allow this’.

The reason for this was that permitting the tenant to run a business could result in the tenancy converting to a business tenancy under Part 2 of the Landlord & Tenant Act 1954.

This had a number of undesirable consequences chief being

  • That the tenant might become entitled to apply for a new tenancy – which you would be powerless to prevent (as this is a right of most business tenants), and
  • That the new property use could put you in breach of the planning legislation

This all seemed a bit unfair though if all the tenant wanted to do was run a small VA business from their spare room.

New Legislation in 2015

The problem was resolved by a change in the law brought about by sections 35 and 36 of the Small Business Enterprise and Employment Act 2015.

This provides that if a business is a ‘home business’ it is outside the scope of Part 2 of the L&TA 1954 and so is something the landlord can safely agree to.

What is a ‘Home Business’?

A home business, according to the act, is “is a business of a kind which might reasonably be carried on at home’. So this could mean things like:

  • A secretarial or ‘virtual assistant’ (VA) business
  • A computer programmer or other computing work
  • A translation agency
  • Financial advice or services

Generally, if the business is not apparent from the outside of the property and does not cause any nuisance to neighbours it is something you can agree to.

But you should not agree to anything

  • which alters the appearance of the property – such as turning it into a shop or cafe, or
  • which is very noisy or results in a stream of people visiting the property at all hours. Such as running a car repair business from the front garden.

If you agree – what should you do?

If you want to allow a home business this should be set out in your tenancy agreement or in another separate legal document.

However, tenancy agreements will all (including our tenancy agreements) prohibit running any form of business at the property, in their standard terms.

It’s not a good idea just to cross this out or say somewhere that a home business is allowed, as you need to include clauses to protect your position. For example

  • That the only business allowed is the specific home business you have agreed to. So if you allow your tenant to do dressmaking this does not also mean that her husband can sell his homebrew (the sale of alcohol should never be permitted).
  • That the business should carry proper insurance, and
  • That the tenant should have all necessary qualifications and certification for the business they are running.

So you need to have a document which limits what the tenant can do and sets out conditions under which you agree to allow the home business.  Enter the Landlord Law Home Business Permission Form.

The Landlord Law Home Business Permission Form

This is one of our tenancy agreement additional forms, which you can use if you want to permit your tenant to do something which is normally forbidden.  We wrote about the Pets form here.

It is a very useful form which sets out the specific business which you are permitting and then has a number of general clauses which should always be included if you decide to allow your tenant to run a home business – for example regarding insurance, preventing damage to the property, etc.

You can either use it at the start of the tenancy when you can specifically refer to it in your tenancy agreement, or you can sign it midway through the tenancy.  When it will have the effect of amending your tenancy agreement terms and conditions.

It’s a very useful little form and aims to make permitting your tenant to run a business as safe for you as possible.

So now, if your tenant loses his job, you can help him by allowing him (for example) to run a low impact business from home.  Which may help him pay his rent and avoid voids for you.

Landlord Law members will find the form here.